Data-Driven Procurement Methods Protect Pharmacies From Price Volatility

The cost of pharmaceuticals in the US is a subject of intense scrutiny and complexity. For pharmacy procurement managers, pharmacy benefit managers (PBMs), and policy makers, understanding not just the price but the stability of price is crucial for forecasting and budgeting.

The National Average Drug Acquisition Cost (NADAC) survey serves as the gold standard for gauging what pharmacies pay for drugs.¹ However, averages often obscure the truth. A drug with a stable $50 price tag is operationally very different from a drug that fluctuates wildly between $10 and $90, even if they share the same average. This volatility introduces inventory value risk, or the danger that a pharmacy purchases stock at a peak price only to see its reimbursement value plummet weeks later.

When this happens, pharmacies are stuck with expensive inventory that they will lose money on every time it is dispensed. This analysis aims to identify which drugs pose the greatest risk so pharmacies can adjust their ordering strategies accordingly.

Data and Methodology

This analysis utilized publicly available data from the Centers for Medicare & Medicaid Services NADAC survey.¹ The NADAC survey represents a comprehensive, nationally representative data set of actual pharmacy acquisition costs for prescription medications.

The research had a 12-month analysis period (January through December 2025). More than 400,000 price records were observed, including 32,943 distinct National Drug Code (NDC) products and weekly updates throughout the analysis period.

To ensure statistical reliability, medications were included in the volatility analysis only if they had a minimum of 10 price observations during the study period, had complete pricing data (no missing values), and were active pharmaceutical products (excluding discontinued items). After applying these filters, the final analytical sample comprised approximately 15,000 medications with sufficient longitudinal data for volatility assessment.

To accurately compare volatility across a diverse formulary ranging from pennies to thousands of dollars, absolute variance is insufficient. Therefore, we utilized the coefficient of variation (CV), calculated as the SD divided by the mean price.

Interpreting CV values:

• CV = 0.0: Perfectly fixed price
• CV > 0.5: High instability
• CV > 1.0: Extreme chaotic pricing (SD exceeds the mean)

For each medication in the data set, we calculated mean price (average NADAC per unit across all observations), SD (measure of price dispersion), CV (standardized volatility metric [SD/mean]), price range (minimum and maximum observed prices), and observation count (number of weekly price points).

To identify the highest-risk medications, we ranked all products by CV and selected the top 20 for detailed analysis. When multiple formulations of the same active ingredient appeared, we retained the formulation with the highest volatility to ensure diversity in our watchlist.

Marketwide Volatility Analysis

Let us start by looking at the big picture. Figure 1 shows how volatility is distributed across all drugs in the NADAC database.

The distribution is heavily right-skewed. Most drugs cluster near a CV of 0.0 to 0.1, which is good news; it confirms that the generic market is generally efficient and stable.

However, that long tail extending to the right is where the problems live. These are not just statistical outliers; they represent real products causing real supply chain headaches. These often correlate with drug shortages, single-source generics, or raw material (active pharmaceutical ingredient) constraints.²

Figure 2 shows the top 20 drugs with the highest CV, representing the highest financial risk for inventory management.

Analysis: Top 20 High-Risk Medications

The Table details the specific volatility metrics for the top 20 identified medications. The minimum and maximum price points show just how dramatic the swings can be.

Some drugs have seen price increases of over 1000% between their minimum and maximum recorded NADAC intervals. For instance, erythromycin 500 mg went from $2.02 to $8.22. That's a 4-fold increase that can destroy a pharmacy’s profit margin.

Strategic Recommendations

For pharmacy procurement, health systems can implement dynamic order ceilings. For drugs identified with a CV greater than 0.5, set the point-of-sale system to block auto-ordering of large quantities. Order these drugs in smaller batches more frequently. Yes, it is more work, but it prevents being stuck with overpriced inventory.

Additionally, when NADAC spikes on one of these high-volatility drugs, pharmacies should call their secondary wholesaler, who may have unused stock at the lower price.

For payers and PBMs, maximum allowable cost lists often lag NADAC spikes by weeks or even months. For these high-CV drugs, consider implementing rapid response updates to ensure pharmacy networks maintain financial viability.³

Extremely volatile medications may signal unstable supply chains. When possible, consider therapeutic alternatives with lower CV scores to ensure consistent member access.

Conclusion

This analysis demonstrates that although the US drug supply chain is largely stable, pockets of extreme inefficiency exist. By adopting data-driven procurement strategies based on volatility metrics such as CV, pharmacies can protect themselves from the worst financial impacts of these market fluctuations.

For pharmacy technicians and pharmacists, print out that top 20 list and keep it near the ordering station. When those NDC numbers come up, think twice before ordering a 3-month supply.⁴

About the Author

Shruti Malik, MBBS, MHSA, CPhT, is a pharmacy technician with CVS Pharmacy and a member of the American Association of Pharmacy Technicians.

REFERENCES

1. Pharmacy pricing. Medicaid.gov. Updated February 3, 2026. Accessed February 12, 2026. https://www.medicaid.gov/medicaid/prescription-drugs/pharmacy-pricing/index.html

2. Drug shortages. FDA. Updated October 23, 2025. Accessed January 24, 2026. https://www.fda.gov/drugs/drug-safety-and-availability/drug-shortages

3. Fein AJ. The 2023-24 economic report on pharmaceutical wholesalers and specialty distributors. Drug Channels Institute. October 2023. Accessed January 24, 2026. https://www.drugchannelsinstitute.com/files/2023-24-PharmaWholesalers-Overview.pdf

4. ASHP Expert Panel on Medication Cost Management. ASHP guidelines on medication cost management strategies for hospitals and health systems. Am J Health Syst Pharm. 2008;65(14):1368-1384. doi:10.2146/ajhp080021